While nearly every industry was impacted by the COVID pandemic, one could argue that no sector took a beating like the hospitality industry. Government shutdowns and consumer hesitancy plagued bars and restaurants. Even in the post-pandemic recovery phase, many hospitality business owners are still struggling to stay afloat due to labor shortages and continued consumer hesitancy.
Why Are Hospitality Businesses Still Struggling?
According to a Bloomberg research study of 13,000 hospitality workers, 50% of workers said they would not return to their former jobs post-pandemic. Even more startling, a third of those surveyed were no longer considering re-entering the hospitality industry. With thousands of baby boomers leaving the workforce due to age and/or COVID, employment opportunities are everywhere. Hospitality workers are realizing they can earn more money while doing a less strenuous job. In fact, the two driving factors pushing hospitality workers out of the industry are better pay and a less physically demanding workplace.
In addition to labor shortages, hospitality business owners also contend with consumer hesitancy. Many of my brewery and restaurant clients have yet to see sales reach pre-pandemic levels. It’s also evident that some consumers still do not feel comfortable sitting in confined, public spaces.
Bars and Restaurants Are Pivoting and Finding Success
Given the lingering effects of COVID, hospitality businesses are now facing a crossroads: continue with the hospitality model or pivot to a manufacturing, wholesale and distribution (MWD) model.
The primary advantage of moving to an MWD model is an increase in consumer base. The hospitality business model is limited by the establishment’s occupancy capacity and geographic location. Theoretically, there are no limits with an MWD model. With the help of a distributor, your product can be sold anywhere and to anyone.
The MWD model also allows a business to focus on the products that sell best. For example, a craft brewery may have ten beverages on the menu, with two drinks selling better than the rest. The MWD model gives the business the opportunity to focus all its efforts on producing the two flagship beverages instead of allocating time and resources to drinks that do not sell well. Ultimately, this can lead to less overhead costs and increased profitability.
3 Factors to Consider Before Moving to the Manufacturing and Distribution Model
There are three drawbacks to the MWD model that must be considered before you go down that path:
- There is generally an investment in plant, property and equipment. Most hospitality businesses do not have enough warehouse and storage space to accommodate a manufacturing operation. Finding the right location and acquiring the right machinery and equipment are vital to setting up an MWD business.
- It takes an investment in marketing and promotion. Finding the right distributor is not easy and takes time, money and effort.
- A manufacturer needs to invest in back-end infrastructure so it can monitor results. Successful manufacturers know that without a good beginning and ending inventory, product costing is nearly impossible. To become properly equipped as a manufacturer, you will need to invest in accounting software that includes an inventory-tracking module. Furthermore, regular cycle counts and full inventory counts will need to be implemented to ensure the accuracy of inventory.
Our software experts took a deep dive into one system’s inventory management capabilities in How to Optimize Inventory Levels and Ensure Product Availability.
Need Help?
If you are a hospitality business owner facing this crossroads, or would like a better understanding of making the move to manufacturing or distribution, contact us here or call 800.899.4623.
